Samsung BioLogics’ stock slides after regulators claim accounting rules infraction

Contract drug manufacturing giant Samsung BioLogics saw its stock slide, losing almost $6 billion in market value Wednesday, after South Korean securities regulators said the company broke accounting rules, Reuters reported.

The nearly 20% drop was the biggest intra-day decline of the company’s shares since going public in 2016. The sell-off came a day after South Korea’s Financial Supervisory Service announced it had notified the company that it broke accounting rules to inflate its net profit before going public. The agency, however, didn’t provide details about the allegation.

Samsung BioLogics, which is an affiliate of Samsung Electronics, said it followed rules supported by the country’s top three accounting firms, adding it might sue the regulatory agency.

"If a decision is made that we cannot accept, we plan to file an administrative lawsuit," Byunghwa Shim, BioLogics’ vice president, told reporters.

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The company said the profit at the center of the allegation was the result of following IFRS accounting standards and dates back to when its books for 2015 were put together, the news agency reported. Approvals for Samsung Bioepis—a unit of Samsung BioLogics at the time—for its copies of blockbuster biotech drugs caused its market value to soar.

One of its minor shareholders, Biogen, decided it could exercise a call option to increase its stake to 50% minus one share.

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Samsung BioLogics said in a statement today that accounting experts told them that according to IFRS rules, Bioepis would need to be categorized as an affiliate and not a unit to make the call option. That would mean the stake would have to be reflected in BioLogics’ books by fair value, not book value, Reuters reported the company as saying.

Samsung Biologics added that the change to fair value and the ensuing net profit was approved by KPMG Korea, Deloitte Korea and PricewaterhouseCoopers Korea, and the issue wasn’t raised by the FSS when the company released the 2015 books in 2016.

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